Tenant wants a rent reduction

[Barry Sugarman]

Hi, all. My wife and I need some advice. We have a tenant in a property (3/2 town house) we rehab’d in the Baltimore area at $1,500/mo. He’s been in the house for two years and his lease is ending. He called and said that he wants to leave and find a cheaper place. I asked what rent he’s looking for and he said $1,200. In the immediate area around that property, $1,500 is the right rent for that property, even a touch low. A couple at $1,400 and $1,500, but several at $1,600 and $1,700. $1,200 doesn’t buy a nice 3/2 (good property and neighborhood as with ours) pretty much anywhere in Baltimore. Some options at $1,350 + in other reasonable areas. He’s been a good tenant— nice guy and pays electronically on time every month. Interestingly, he’s an IT guy at my company which I didn’t know until he showed up for his tour 2 years ago. So, I know he hasn’t lost his job, BTW. One one hand, we’re trying to assess the likelihood that he’ll leave. On the other hand, if he does leave, we’d have to pay a property manager to get a new tenant (we no longer live in Baltimore), do some repairs (hopefully around $1,000 but we’ll see) and then lose a months’s rent at least. So, I amortized $1,500 for tenant placement + $1,500 for lost rent + $1,000 for repairs. So, if he leaves, my best effective rent for the next year is $1,167. Yet, we don’t just want to lose on the rent. What to do! It feels like a game of chicken. Thanks in advance for any advice.

[Chris Seveney]

@Barry Sugarman

Do a 13/12 lease meaning sign him up for 12 months and give him the 13th month free. That way if you try and sell it you still have the higher rent price and gave him a concession for being a good tenant.

I would try and keep him if he is a good paying tenant